Fate of Libya's telecom investments uncertain

Michael Malakata |
March 18, 2011

Sanctions may lead to network disruptions among Libya's telecom holdings throughout Africa

LUSAKA, ZAMBIA, 18 MARCH 2011 - As economic sanctions against Libyan President Moammar Gadhafi and some of the country's government agencies take effect, uncertainty about the country's telecommunications holdings is growing.

Libya has moved to compete with major telecom players in Africa, including Airtel, Vodacom and MTN. The Libyan Investment Authority Portfolio network, under the LAP Green brand, is a pan-African mobile operator that has a presence in countries including Zambia, Uganda, Niger and the Ivory Coast.

LAP Green has over the past few years pushed to further invest in the region's telecom market. In 2009, for example, LAP Green signed a US$300 million financing agreement with the Industrial and Commercial Bank of China to fuel its expansion program in Africa.

LAP Green is a component of the Libyan-Africa Investment Portfolio, the sovereign wealth fund for Libya. Among other holdings, LAP Green owns about 75 percent of the Zambia Telecommunication Co. (Zamtel) after buying a $257 million stake last year. In addition, the Libyan Investment Authority (LIA) Wealth Fund holds about $70 billion and has a stake in a number of African and European companies.

But with a number of key countries breaking economic ties with Libya in reaction to the killing of rebels trying to unseat Gadhafi, analysts fear that there might be problems ahead for Zamtel and other networks across the region.

Outside of Africa, the European Union has extended sanctions to include Libya's sovereign wealth fund and central bank, and the U.S. has frozen assets valued at about US$30 billion. Meanwhile South Africa, Africa's largest economy, has imposed sanctions and frozen assets linked to Gadhafi. The Zambian government said it may review its economic ties with Libya.

Improvements to LAP Green's infrastructure have been funded by Libya's investments in Europe and America, notes Amos Kalunga, a telecom analyst with the Computer Society of Zambia. Up until recently, Libya was also able to borrow from international institutions to expand LAP Green's network, he said. Libya has had to borrow money for telecom expansion because LAP Green's operations in many African countries have not yet started turning a profit.

"Zamtel is going to face financial problems that may even lead to the closure of the company as a result of sanctions," Kalunga said.

The Zambia Development Agency (ZDA) has moved to assuage fears that the troubles in Libya will disrupt the local economy, including the telecom sector.

"Zamtel's future was well-protected from the political chaos that is threatening [the] Libyan government's investment in Africa," ZDA Director General Andrew Chipwende said last week.

Zamtel officials have also chimed in.

"Zamtel will continue with its investment program in the country and will continue expanding its existing network," said Zamtel Managing Director Hans Paulsen at a media briefing in Lusaka, Zambia, this week.

Paulsen said Zamtel has even signed a contract with Chinese ZTE to expand the company's existing network.

The Ugandan government said it will wait for the United Nations "operational guidelines" before it makes any decision on Libya. LAP Green owns Uganda Telecom as well as Rwandatel in Rwanda.

As in Zambia, LAP Green officials in Uganda and Rwanda claim that the sanctions will not hamper the network's investments and expansion plans because the companies have various options to sustain operations, including vendor financing and the raising of private equity.

Nevertheless, governments are being criticized for a lack of foresight.

"The Zambian government should have undertaken appropriate assessment of LAP Green, which would have provided information about the threat to Zamtel's investment exhibited by a change of the political situation in Libya," said the Computer Society of Zambia's Kalunga.